InsiderOnline Blog: December 2012

Well-intentioned regulation often represents the preferences of the wealthy by regulating otherwise negligible risks. By driving up prices for all consumers, such regulation is likely to have disproportionately negative or regressive effects on the poor. This study shows that compared to potential private risk-reduction strategies, regulation tends to target low risks that are extremely expensive to mitigate. Such regulations, therefore, represent the preferences of the wealthy and come at the expense of low-income households.

The 36 different regulations included in this rough estimation of the cost and benefits of public risk-mitigation strategies resulted in a total reduction in the risk of a fatality of 0.18 in 10,000 of population and cost approximately $604 per household, which translates to $3,359 for a 1 in 10,000 reduction in mortality. In contrast, the private risk-reduction strategy of moving to a high-income neighborhood would reduce mortality risk by roughly 8.3 in 10,000 people for adult mortality risks and by 1 in 10,000 for pediatric injury risk. Such private risk-reduction costs a total of $6,000 per household, which translates into a cost of $645.16 for a mortality risk reduction of 1 in 10,000 people. In consequence, having to pay for small risk reductions through regulation may prevent low-income households from taking more beneficial private risk reduction strategies that would result in a greater reduction in mortality. [“The Regressive Effects of Regulation,” Mercatus Center, November 12]